INTM342550 - DT applications and claims - Types of income: Royalties

Copyright royalties - Beneficial ownership

It is unusual for a company to be the originator of a work for which copyright royalties are payable. This is because people write books and songs etc. However, some works are written under the terms of "work for hire" contracts. That is, where a company employs someone, pays them wages and directs them to produce a particular piece of work.

It is possible for the originator of the work to assign their rights in a work to some other person. Authors may decide to assign their rights for a number of reasons. These include

• a record company that will produce and market a song etc
• a literary agent who will represent the interests of the author
• a personal service company wholly owned by the originator of the work
• The original artist/author dies and leaves the rights to someone in their will

Because of this you need to consider checking to make sure that the claimant is the beneficial owner of the income. For example you may need to ask for confirmation that

• The claimant is the originator of the work in question or that they have legally acquired the rights from the originator.
• The claimant is not acting merely as an agent. If the claimant is acting as agent you must insist that the beneficial owner (which could be either the originator or a company to whom the originator had assigned his rights) makes the claim.
• The claimant has acquired the UK rights. The claimant may have acquired the rights for certain territories but not the UK.
• The claimant has acquired all the UK rights. The claimant may have acquired some but not all of the UK rights for example the author of a play may have assigned the rights for first class presentation but kept or assigned to another party the touring rights or amateur rights.

However, there are a few Double Taxation Agreements (DTAs) where there is a "subject to tax" condition (see INTM332200) for royalties. You do not need to make beneficial ownership checks on claims made under these DTAs. For example a claim from a resident of Germany who is not the originator of the work may be allowed without further enquiry provided that the claimant is subject to German tax on the income and the claim is certified accordingly.

If you receive a claim from a non-resident and you discover that the royalties claim relates to work of a UK resident you should refer the case to Technical Advice Group.